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Business – Russian banks accept pigs as collateral to recoup losses

MOSCOW: When Russian billionaire Alexander Lebedev’sOAO National Reserve Bank seized collateral offered against a loan from a cash-strapped
borrower, a health quarantine was slapped on the security: 40,450 pigs.

“We had a court decision to take away the collateral, which is the pigs,” Lebedev, 49, said in an interview in Moscow. The borrower, a farm near Samara on the Volga river, agreed “with the local authorities to establish a quarantine” against African swine fever.

The former KGB officer is still waiting to collect the pigs offered against a loan of 100 million rubles ($3.5 million). A kilogram of live pig costs an average of 78.4 rubles, the National Meat Association says.

Russian lenders are seeking to recoup losses by accepting a range of collateral, including stakes in Wild Orchid, a lingerie retailer, and food store Mosmart. The banks have been hit by a surge in non-performing loans, which Moody’s Investors Service estimates may rise to 20% of the total by year-end. The bad debt threatens to stall bank lending and may jeopardise a recovery in Russia’s economy, which grew 0.6% in the third quarter from the second, the Economy Ministry says.

“It is not a viable strategy for a bank because banks aren’t doing their core business there,” Eugene Tarzimanov, assistant vice-president and banking analyst at Moody’s in Moscow, said. “They could be stuck with those assets for a number of years.”

Russian banks are characterised by “very high risk on a global comparison,” Standard & Poor’s said in a September 28 report. The share of “problem loans” may jump to $110 billion by year- end and account for 25% of total lending by the end of 2010, compared with 11% in the middle of this year, Moody’s estimates.

“We have no idea how to build roads, milk cows or pour metal,” said Vladimir Tatarchuk, co-head of corporate finance at Alfa Bank, told reporters in Moscow on October 23.

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October 27, 2009 - Posted by | Uncategorized |

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